China trade data disappoint, as exports fall 3.1%

Workers sleep during a break in front of the World Trade Center in Beijing in this file photograph from 2011.

LOS ANGELES (MarketWatch) — China’s trade performance for June showed drops in both exports and imports, according to reported customs data out Wednesday, disappointing for a second month in a row after May’s results missed estimates by a wide margin.

China’s exports last month fell 3.1% from a year earlier, swinging from May’s slim 1% gain, and coming in well below a forecast 4% rise from a Reuters survey of economists.

It marked the first year-on-year drop for exports since January 2012, and, according to the Financial Times, was the worst performance since October 2009.

Imports decreased by 0.7% after slipping 0.3% in May, with Reuters having tipped an 8% annual increase for June.

The General Administration of Customs, which issued the data, underscored the weakness in the numbers, with the agency’s spokesman Zheng Yuesheng saying it “can’t be too optimistic about exports for the third quarter.”

“The yuan’s appreciation and rising labor costs have added to the difficulties that exporters face,” Zheng said at a news briefing.

But despite the weak annual performance for exports, the trade surplus still posted a gain on a monthly basis, widening to $27.13 billion from May’s $20.4 billion, though falling just short of a projected $27.75 billion surplus in a Dow Jones Newswires poll.

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While most Chinese government data are subjected to doubts from some economists over their accuracy, the trade numbers attract especially strong criticism.

In a post on Twitter immediately following the data release, DailyFX.com chief strategist John Kicklighter cited the contrast between the wider surplus and the fact that the loss in exports outpaced those of imports.

After China posted an April gain in exports sharply higher than estimates, many analysts attributed the performance to poor data-gathering, exporters logging fake orders to help their tax bill, and capital inflows being disguised as exports.

The following month, China’s foreign exchange regulator announced a crackdown on such false invoicing, and May’s results ended up printing significantly weaker than economists’ estimates.

June’s trade results marked the latest in a string of weak numbers coming out of China, with the market now looking ahead to Monday’s release of second-quarter gross domestic product, and industrial output and retail sales for June, among other statistics.

Despite the apparent economic slowdown in China, the government has signalled no intention of easing monetary policy or adding to its existing fiscal stimulus.

But RBS analysts said Wednesday that next week’s numbers could prove the breaking point.

Reuters

An employee wearing a self-made cardboard mask works inside a bicycle factory in Zaozhuang, Shandong province, June 9, 2013.

“The June trade data challenges the resolve of China’s policy makers to keep the macro policy stance firm. So far, the government has not budged, holding firm not only on the monetary side, but also largely on the fiscal side,” they wrote.

“Given the political capital invested in the policy line of holding firm on the macro stance, we do not expect a headline easing yet. Nonetheless, if the Q2 [GDP] data disappoints further, we would think that, on the margin, some steps should be expected,” they wrote.

Markets boo data, but stocks hold gains

Hong Kong’s Hang Seng Index
HSI, +0.18%
was up 0.3% versus a 1.4% rise just ahead of the release, while the Shanghai Composite Index
SHCOMP, -1.02%
also pared its advance, trading 0.2% higher from a 0.5% gain before the numbers.

The Australian dollar
AUDUSD, +0.14%
— often sensitive to economic news from Australia’s key trading partner — dropped to 91.41 U.S. cents from 91.64 U.S. cents pre-data.

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